According to the just-released Rapaport Research Report, “Questionable Stability,” ‎diamond prices stabilized in December as U.S. wholesale buyers closed for the holiday ‎season and Indian manufacturers cautiously resumed operations after Diwali. ‎

Rough trading remained quiet with improved demand for non-De Beers goods, which ‎continued to offer better value than expensive De Beers rough. Manufacturers, who ‎gained slightly better profit margins in December, expressed concern that De Beers and ‎ALROSA might raise rough prices in the first quarter as the mining companies continue ‎to limit supply. ‎

Initial reports from the U.S. holiday season do not justify a rough price hike. While U.S. ‎diamond demand was stable in the fourth quarter, preliminary data reveals mediocre ‎overall U.S. retail sales during December. Prolonged fiscal negotiations in Washington ‎weighed down on consumer sentiment as pending tax hikes on the wealthy impacted ‎spending. ‎

Elsewhere, Indian domestic jewelry sales were stable during the ongoing wedding season ‎but overall caution lingers about the local economy, especially since government taxes, ‎the weak and volatile rupee, and high rupee-based gold prices have taken their toll ‎throughout 2012. ‎

Chinese consumer confidence diminished in 2012 as the weak global economy affected ‎the country’s trade and subsequently lowered domestic consumption and investor ‎confidence. Forecasts point to improved growth in 2013 due to potential stimulus from ‎the new government, raising expectations in the diamond and jewelry trade for better ‎demand during the Chinese New Year season. However, the U.S. debt ceiling ‎negotiations, now postponed to coincide with the Chinese New Year, could impact Far ‎East consumer confidence and spending, much as the European debt crisis did in 2012. ‎

Forecasts for pending diamond price increases are premature and the trade should be ‎careful not to inflate prices by buying diamonds with easy credit. Bank credit that enables ‎firms to buy diamonds at unsustainably, artificially high prices must be stopped. ‎‎ ‎‎“Given expectations that the fiscal cliff will reduce demand for luxury products due to ‎higher taxes, increased unemployment and reduced government spending, responsible ‎companies should refuse to buy diamonds at prices that do not allow for healthy profits. ‎Buyers should just say no to high prices. The real value of diamonds must be based on ‎real money from real buyers,” said Martin Rapaport Chairman of the Rapaport Group.‎